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Saturday, March 4, 2017

Republican health-law drafts would reduce federal support for Medicaid and subsidies of private insurance

Kentucky would have to keep paying more for Medicaid, and people with federally subsidized health insurance would get less support, under a committee draft of a bill to repeal and replace the Patient Protection and Affordable Care Act.

"States that grew their Medicaid programs under the health law could
maintain their expanded programs until 2020 before federal funding would
decrease," The Wall Street Journal reports on the draft by the House Energy and Commerce Committee.

Then-Gov. Steve Beshear expanded Medicaid in 2014, adding 440,000 Kentuckians with incomes up to 138 percent of the federal poverty line. The state is paying 5 percent of this year's cost, and current law calls for that to increase in annual steps to 10 percent in 2020.

The House committee draft would shrink the federal share and require states to pay more, starting in 2020. The federal government pays about 70 percent of traditional Medicaid costs in Kentucky.

"Starting on Jan. 1, 2020, the federal government would begin to
reimburse states at a lower rate as they transition to a system in which
states would get a set amount of funding, tied to the size of their
Medicaid population, along with more flexibility on how they could spend
it," the Journal reports.

"The proposal is aimed at appealing to centrist Republicans who haven’t
wanted to see the most generous federal funding for the program abruptly
withdrawn, which could cause states to shrink Medicaid rolls. Some
conservative Republicans have pressed for a more immediate rollback of
the program."

Rep. Brett Guthrie

Among those are 2nd District Rep. Brett Guthrie, R-Bowling Green, who said of 2020, “Some people thought that was too far in the distance.”

Conservatives are focused on reducing the cost of the program. Under the committee draft, federal Medicaid spending would increase with the "chained" consumer price index, plus 1 percentage point. "The chained CPI usually
shows slower inflation than the index used currently," the Journal notes. "Critics worry, however, that using chained CPI,
which will reflect growth slower than the rise in health-care costs, would cause the government’s funding to fall short of needs."

The biggest obstacle to a new Medicaid program may be differences between states that expanded it and those that did not. The Journal notes that Republicans from the latter states "have balked at the idea of a plan that would reward states that did," many controlled by Republicans.

Kentucky is in an unusual position because its program was expanded by a Democratic governor without the involvement of the legislature, where Senate Republicans could have blocked it, but now the state is fully controlled by Republicans.

In his primary campaign, Gov. Matt Bevin said he would abolish the expansion, but after being nominated said he would scale it back, following an Indiana model that charges small, income-based premiums and imposes certain work requirements. His request to do that is pending before federal officials, one of whom helped draft the Indiana plan.

The broader political problem for Republicans is described by William Galston of the Brookings Institution: "The states that Donald Trump carried in 2016 disproportionately benefitted from the expansion of Medicaid that was one of the building-blocks of Obamacare, and they will suffer disproportionately from Medicaid cuts.
Between 2013 and 2016, Gallup finds, the three states with the largest percentage-point reductions in their populations without health-care coverage were Kentucky, Arkansas, and West Virginia." All expanded Medicaid.

Private, subsidized insurance

In addition to Medicaid expansion, the ACA provided subsidies for private insurance bought on government exchanges: tax credits for people with incomes up to four times the poverty level, and cost-sharing for those up to 250 percent of the poverty line, to provide lower deductibles and copays on plans that cover a larger share of expenses.

For a larger version of either chart, click on the image

Under GOP replacement plans that have been publicly discussed, the subsidies would be at least a third less than now offered, and would rise more slowly over time, says the Kaiser Family Foundation.

"People who are lower income, older, or live in high premium areas would be particularly disadvantaged," Kaiser reports on its analysis.

Under a discussion draft circulated by House leaders, "The average tax credit for current ACA marketplace enrollees would rise from an estimated $2,957 in 2020 to $3,729 in 2027. By comparison, the average tax credit under the ACA would be $4,615 in 2020, increasing to $6,648 in 2027," Kaiser reports.

The three major Republican proposals' tax credits "vary with age but not income and grow annually with inflation," Kaiser notes. Current tax credits "vary with family income and the cost of insurance where people live, as well as age, and grow annually if premiums increase. These various tax credit approaches can have quite different
implications for different groups of individual market purchasers. For
example, the tax credits under the ACA are higher for people with lower
incomes than for people with higher incomes."

Republican proposals would also provide tax credits to people who don't now get them. Some Republicans have said no subsidies should go to people above a certain income level.

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Kentucky Health News is an independent news service of the Institute for Rural Journalism and Community Issues, based in the School of Journalism and Media at the University of Kentucky, with support from the Foundation for a Healthy Kentucky.Republication of any KHN material with proper credit is hereby authorized, but if the republication is longer than a news brief we ask that it contain the first sentence of this paragraph. For our site that features articles of lasting importance, go here.